What is Medicaid estate recovery, and who does it affect?

What is Medicaid estate recovery?

Medicaid estate recovery is how a state collects back some or all of what it paid for a Medicaid enrollee's long-term care, after that person dies. The requirement traces to a 1993 federal law, Section 1917(b) of the Social Security Act, effective October 1, 1993: every state must run a Medicaid estate recovery program (MERP) to keep its federal funding³.

Medicaid is not a loan; a recipient never signs a promissory note. Recovery works like a creditor's claim: after death, the state agency files a claim against the estate, paid in the priority order state probate law sets.

Who Medicaid can bill after someone dies

Two groups are covered: anyone age 55 or older who received Medicaid-paid nursing facility care, home and community-based services (HCBS), or related hospital and drug services¹; and a permanently institutionalized person of any age, meaning Medicaid does not expect them to return home. States can place a lien on this second group's home while they are still alive³.

Nursing facility services mean the skilled nursing and medical care given in a licensed nursing home. HCBS mean care delivered outside an institution, such as a personal care aide or case management under a state's HCBS waiver⁸,⁹.

The federal rule and how much states vary

What states must recover, and what they may recover

For someone 55 or older, a state must recover the full cost of nursing facility services, HCBS, and related hospital or drug services. Beyond that, a state may also recover for any other Medicaid service in its state plan, such as regular doctor visits³.

Probate-only states vs. expanded-estate states

Federal law sets a floor: a state must recover, at minimum, whatever passes through the deceased person's probate estate. Beyond that, a state can adopt an "expanded" definition reaching any property the person had a legal interest in at death, even if it skips probate³.

This is a state policy choice, so ask your state Medicaid agency's estate recovery unit which definition applies.

Is there a limit on what Medicaid can recover?

Yes, two limits apply at once. ASPE, an HHS research office, states the rule plainly: "Recoveries may not exceed the total amount spent by Medicaid on the individual's behalf, nor the amount remaining in the estate after the claims of other creditors delineated in state law have been satisfied"². In short: it cannot recover more than it paid, or skip ahead of higher-priority debts like funeral costs or a mortgage.

This is also why a trust can matter. Medicaid.gov confirms that "money remaining in a trust after a Medicaid enrollee has passed away may be used to reimburse Medicaid" under certain conditions¹, and the same two caps apply. A trust is reachable only where the estate definition or its own terms cover it. Funding matters too: a first-party special needs trust, funded with the beneficiary's own money, must by law include a Medicaid payback provision; a third-party trust, funded by someone else such as a parent, holds assets that were never the beneficiary's own and is not subject to payback (42 U.S.C. Section 1396p(d)(4)(A), checked 2026-09-30).

TEFRA liens: recovery before death

A state may also place a pre-death TEFRA lien, named for the Tax Equity and Fiscal Responsibility Act of 1982, on the home of a living, permanently institutionalized recipient. States are not required to use them and must give notice and a hearing first. The lien must be lifted if the person returns home, and cannot be placed if a spouse, minor child, or blind or disabled child lives there³.

Does Medicaid take your house after death?

Not directly, and not automatically. Medicaid does not seize a house the way a repossession works. It is closer to any other unpaid bill: the state files a claim against the estate, and if the house is the main asset and no protection applies, the executor may need to sell it or find another way to pay the claim.

Whether a specific house is reachable depends on the state's definition of estate, who else is on the deed, and whether a spouse, protected child, or qualifying sibling or adult child lives there. If the house does need to be sold or transferred, see what to do with a house after a parent dies for the steps that follow.

Surviving spouse and disabled child protections

Federal law sets four protections every state must follow, though they work differently from each other.

• Surviving spouse. Recovery is paused, not canceled, while a spouse is alive; the state can pursue it later from the spouse's own estate³.
• Child under 21. No recovery while a surviving child is under 21.
• Blind or disabled child, any age. No recovery, ever, while a surviving child is blind or disabled, at any age; this bars recovery outright.
• Caregiving sibling or adult child. A TEFRA lien on the home cannot be foreclosed if a sibling with equity in it lived there at least a year before admission and has lived there since, or if an adult child lived there at least two years before, has lived there since, and shows their care delayed admission³.

None of these require a court fight; they are built into the federal rule. The first step is telling the state Medicaid agency, in writing, which one applies.

Hardship waivers: exemptions from Medicaid estate recovery

Every state must let heirs apply for a waiver when recovery would cause an undue hardship, but Congress left "undue hardship" undefined, so each state writes its own standard³.

What CMS suggests states consider

Federal guidance lists three situations for states to consider, though none is mandatory: a family farm or other sole income-producing asset with limited income; a homestead of "modest value," which CMS suggests as 50% or less of the average county home price at the date of death; or other compelling circumstances the state recognizes.

States vary widely here. As of a 2021 federal review, 36 of 48 states with usable data applied some version of the income-producing-asset criterion, while only 8 of 48 offered a modest-value-home waiver⁴. Some states set their own bright-line rules: Mississippi waives recovery outright when the estate is worth less than $5,000 with no burial money set aside⁴.

How to apply for a waiver

1. Wait for the state's notice of intent to recover; advance notice is required³.
2. Ask the agency, in writing, for its hardship waiver application and criteria; do not assume the CMS examples above apply.
3. Gather proof: tax or business records for the income-producing-asset exception, or a recent appraisal for a modest-home claim.
4. File within the deadline, and ask about the hearing and appeal rights the notice must describe.

A free SHIP (State Health Insurance Assistance Program) counselor can help a family weigh its options⁵.

What to do when a Medicaid recipient dies

1. Get certified death certificates for the executor checklist and settling the estate.
2. Confirm with the state Medicaid agency whether the person received nursing facility care or HCBS from age 55 on.
3. Expect a notice of claim from the estate recovery unit; timing varies by state. See probate courts by state for self-help links if probate is opening too.
4. Identify which federal protection might apply: a surviving spouse, a child under 21, a blind or disabled child, or a qualifying caregiving sibling or adult child.
5. If none applies and the estate cannot easily absorb the claim, ask about a hardship waiver before assuming the house must be sold.
6. Fold this into what to do when someone dies: the claim is paid in the same priority as other debts.

What families should record now to make this easier later

Most of the stress here comes from surprise, not the rule itself. An adult child who does not know a parent was on Medicaid, or how the house is titled, has far fewer options once a claim arrives:

• Whether the person is enrolled in Medicaid, and in which state
• Whether they receive nursing facility care or HCBS, and since when
• How the home is titled: sole ownership, joint tenancy, a living trust, or something else
• Whether an adult child or sibling lives in the home and has provided care there

This is exactly the kind of information a family guide, such as the one Omliva helps a family build, is meant to keep in one place alongside the will and the accounts. Our how to organize important documents for family guide walks through setting that up.

Who to contact

When to get professional help

Handle this yourself when the facts are simple: no spouse or protected child, little beyond ordinary personal property, and a claim unlikely to matter. Bring in an elder law or probate attorney when a home, a caregiver exception, unclear hardship rules, or a trust or jointly held property is involved. Attorney fees are typically paid from the estate.